BKZHY

Unicredit Struggles to Demonstrate Earnings Power

by

When one looks at individual bank interests and also the national champion nature of many banks that are closely tied to their home countries, it becomes difficult to picture how the overtraded European banking landscape will resolve itself. One scenario is perhaps by smaller banks coming together, though that might not really move the needle that much. We generally dislike the banking industry due to the arbitrary nature of its cash flows, weak economic returns, and highly-regulated nature, and we think Unicredit may be one to avoid, in particular. By Matthew Warren Unicredit (UNCRY) put up another measly quarter, results released August 6, this time with small positive underlying net profits of EUR 0.5 billion. Revenues were down 7.7% compared … Read more

BNP Paribas is One of the Stronger Banks in an Overtraded European Landscape

by

While some of the stronger global banks like BNP Paribas are showing that they can take the economic fallout from COVID-19 on the chin while maintaining some degree of earnings power and protecting strong capital levels, other banks with lesser earnings power and balance sheets are falling prey to this cycle with losses and lower capital levels. From our perspective, it is simply easier to find non-bank operating companies with strong moats, sound balance sheets, and visible free cash flow growth into the future. Be careful investing in banks! By Matthew Warren On July 31, BNP Paribas (BNPQF) put up a reasonable set of results in the second quarter, considering the global pandemic’s substantial impact on the economy. As you … Read more

Santander Working Its Way Through the Pandemic

by

The underlying first-half results from Banco Santander are quite reasonable. We are impressed by how well the South American, Corporate & Investment Banking, and Wealth Management & Insurance segments are holding up in such a tough environment. In its large European operations, pressures that come from the whole continent being overbanked were evident, however. By Matthew Warren On July 29, Banco Santander (SAN) reported first-half 2020 results. The bank is working its way through the pandemic, with total income down 8% in the first half and underlying attributable profit down 53%. While it took massive goodwill write downs in the quarter, these do not affect its capital levels, which are healthy and growing since last quarter end. As one can … Read more